Cardano Foundation Advocates for Distinct Regulatory Treatment of DeFi and Staking in EU Crypto Regulations

Summary of the Foundation’s Position on EU Regulatory Frameworks for Digital Assets

Cardano Foundation Calls for Clearer Guidelines on Hybrid Tokens, Stablecoins, and NFTs

Distinguishing Between Decentralized Infrastructure and Financial Services: A Key Regulatory Concern

MiCA Review: Addressing the Interaction with Existing Financial Laws

Maintaining NFT Exemptions: Cardano Foundation’s Stance on Unique Digital Assets

Tackling EU Regulatory Discrepancies: A Call for Harmonization and Clarity in Crypto Regulations

Cardano Foundation Urges EU to Rethink Crypto Regulations, Advocates for Existing Frameworks

Brussels, Belgium — The Cardano Foundation has voiced strong opposition to proposed European Union regulations aimed at governing decentralized finance (DeFi), staking, and other blockchain activities. In a consultation response submitted on September 30, the Foundation urged policymakers to focus on refining the existing Markets in Crypto-Assets Regulation (MiCA) rather than introducing new, potentially burdensome regulations.

The Foundation argues that a clear distinction must be made between direct blockchain participation and financial services managed by intermediaries. “Regulatory requirements should reflect the actual activities of companies or individuals, particularly regarding their control over customer assets,” the Foundation stated. This perspective is crucial as the EU reviews MiCA’s implementation and considers whether additional oversight is necessary for activities currently outside its scope.

A Call for Clarity in Regulation

In its response, the Cardano Foundation emphasized the need for clearer rules surrounding hybrid tokens, stablecoins, and non-fungible tokens (NFTs). The Foundation warned that inconsistent regulatory interpretations across EU member states could create significant hurdles for smaller crypto businesses, potentially stifling innovation in the sector.

“Creating separate regulatory frameworks for decentralized activities could lead to unnecessary compliance requirements without addressing existing risks,” the Foundation cautioned. The call for clarity comes as the European Commission seeks feedback from various stakeholders, including cryptocurrency businesses and financial institutions, to inform its review of MiCA.

Differentiating DeFi and Staking

A central concern raised by the Foundation is the treatment of decentralized finance and staking. The Foundation argues that merely providing blockchain infrastructure should not automatically classify a service as a regulated financial activity. For instance, on the Cardano network, ADA holders can delegate their stake without transferring custody of their tokens, which supports the network’s security and decentralization.

In contrast, staking services offered by intermediaries often involve custody arrangements, which necessitate different regulatory considerations. The Foundation recommends that direct participation in blockchain consensus mechanisms be treated separately from commercial staking services when determining regulatory obligations.

Navigating Existing Financial Laws

The consultation also highlighted the complexities surrounding how MiCA interacts with existing financial legislation, particularly the Markets in Financial Instruments Directive II (MiFID II). The Foundation supports maintaining the current distinction between these regulatory frameworks but calls for clearer guidance on hybrid tokens and assets whose legal classification may vary across member states.

Concerns were also raised regarding stablecoins, especially those involving multiple issuers or operations across jurisdictions. The Foundation advocates for clarifying how such structures should be treated under MiCA, addressing potential overlaps with European payment services legislation.

NFTs and Regulatory Exemptions

The Foundation also focused on NFTs, advocating for the retention of exemptions for genuinely unique and non-fungible assets under MiCA. It argues that classification should depend on the individual asset’s characteristics rather than its membership in a collection. Additionally, the Foundation opposes creating a separate regulatory regime for NFT-related services, suggesting that existing legislation should suffice.

Addressing Regulatory Disparities

Despite MiCA’s aim to establish common rules across the EU, the Foundation expressed concerns over ongoing differences in national interpretations and supervisory practices. It called for more consistent regulatory interpretations and clearer rules governing ownership and transfers of tokenized assets across borders.

The Foundation’s recommendations include harmonizing conflict-of-laws provisions to determine applicable laws for transactions without requiring identical property laws across member states. It also supports legitimate reverse solicitation arrangements for companies operating outside the EU.

As the European Commission reviews the consultation responses, the Cardano Foundation hopes to see a balanced approach that fosters innovation while ensuring regulatory safeguards. The ongoing dialogue between the Foundation and EU policymakers will be crucial in shaping the future of cryptocurrency regulation in Europe.